Amongst the financial crimes recognized worldwide and defined differently by them, the present article would analyse the recently emerged escape-route followed by the High Net Worth Individuals (HNWI) after the commission of financial crimes leading to erosion of wealth of the concerned economy, and absconding across national borders to get away with criminal trial. The term ‘financial crime’ has been defined by the Australian Criminal Intelligence Commission to “include activities ranging from fraud through active manipulation of the stock market, or laundering the proceeds of crime”. A region which is prone to financial crimes in a specific sector of economy would discourage investment and would divert the available resources towards law enforcement and fighting crime. The costs associated with this affects the ease of doing business in the country.
This article analyses the recent Nirav Modi fraud case that subsequently led to the introduction of Fugitive Economic Offenders Ordinance, 2018 (FEO Ordinance) which aims at punishing the persons accused of financial crimes in India who have left India like Vijay Mallya, Nirav Modi, etc. The article initially establishes a base of facts as took place in the case and then explains the role of Letters of Undertaking (LoU) in the whole set up. It further discusses the regulations governing such bank guarantees and the gaps which were observed in the present case. It also throws light on the recently emerged SWIFT transactions and auditors’ duties with respect to bank guarantees.
Along with the introduction of the FEO Ordinance, the Union Cabinet of India, on March 1, 2018, approved the setting up of an independent regulator of auditors named the National Financial Reporting Authority (NFRA). The powers of this authority have also been described further in the article by comparing the same with the institutions existing prior to such Authority.